black…MYstory

Do you all ever get really fed up with being lied to about the economy. I listened to Bush, today, railing against raising taxes and admonishing presidential candidates that it would be gloom and doom for them to even consider this. In other words, Bush thinks his economic policy is sound and that the war is not a drain on the economy.

Well, I ran across two stories that factually discredit this line of thinking. The first is that U.S. Treasury Secretary Henry Paulson is warning that, as of October 1, the U.S. will reach the debt limit of $8.965 trillion. What this means is that the government would not legally be able to issue treasury bonds or, to put it in a way that more would understand, not be in the position to borrow more money. The Congress is expected to raise the ceiling by another $850 billion. So, what this means is that there is not enough money coming in (taxes — think tax cuts for the rich) and that there is too much money going out (think war in Iraq) and, therefore, the U.S. needs to borrow money. Also, consider this — this will mark the 5th time that the debt ceiling has been raised since Bush took office.

The second is that the dollar is declining greatly. One euro now equals $1.40 in U.S. currency. This is its highest level against the dollar since the euro was introduced in 1999. But, an even more startling fact was revealed yesterday. For the first time since 1976, the Canadian dollar is now equal in value to the U.S. dollar.

So, what does this all mean? Well, consider the following excerpt from the ABC News article:

What does a weak dollar mean for all that, and why should I care? If the dollar falls too much, foreign investors and banks won’t be so interested in buying T-bills and bonds that keep the U.S. government and businesses humming. That’s because the interest rate might not be enough to compensate for inflation. In other words, whatever is earned would be worth less money.

To attract buyers, the T-bills and bonds will sell for less and have higher interest rates. And since many mortgages are tied to these interest rates, that might mean mortgage rates won’t drop anytime soon. Also, a weak dollar might scare away foreign investors who don’t want to own stock in U.S. companies.

It could also mean the following:

Look at the record-high price of oil. Even if the same amount of oil is being pumped out of the ground, since it is traded in dollars and the dollar has weakened, the price of oil has increased to make up for the lost value of the dollar, creating a sort of vicious cycle.

Oil-producing countries don’t want to keep all the dollars they are getting for their oil, since it’s worth less, so they are diversifying and converting their dollars into euros or other currencies. That pushes more dollars back out into currency markets, which in turn pushes down the dollar’s value.

One analyst told ABC News that Russia used to have 90 percent of its financial reserves in dollars. It now has 45 percent in dollars, 45 percent in euros and 10 percent in British pounds.

So, this is what “conservative” policy gets you — more debt. So, Republicans, riddle me this? Where are we going to get the money to pay for all this debt without raising taxes?

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